(UBS)
Commodity prices rose in January despite sharp swings.
- Precious metals prices—while volatile—rose in January as political, geopolitical, and economic uncertainties drove “safe-haven” demand.
- The copper price hit a record high in late January before consolidating.
- Oil prices were boosted by temporary supply disruptions in the US and Kazakhstan, as well as a weaker US dollar and geopolitical tensions in the Middle East.
Further volatility is likely in the near term, but we believe fundamentals remain supportive.
- We see gold consolidating in the USD 4,500-4,800/oz range in the near term, but expect it to rise to USD 6,200/oz by mid-year, supported by central bank and investor demand, large fiscal deficits, lower real US interest rates, and geopolitical risks. For silver, given the recent extreme volatility (60-120%), we remain cautious and believe it is too early to build long-term exposure.
- We project further supply shortages for copper and aluminum, which should support prices over the medium term, while structural drivers (e.g., electrification) underpin long-term demand.
- We forecast Brent crude oil at USD 65/bbl in June and USD 67/bbl in December.
Commodities can help diversify portfolios, and we see various ways to invest in them.
- As we have seen recently, commodities can face volatility, but they can also play a valuable role in portfolios as they have historically shown low correlation with equities and bonds.
- Investors can access commodities through diversified indices, exchange-traded funds (ETFs), exchange-traded commodities (ETCs), or structured investments.
- However, they should be aware of unique risks such as price swings and costs associated with futures or physical holdings.
Investment view
Commodities are set to play a more prominent role in portfolios in 2026, in our view, offering diversification amid supply-demand imbalances, geopolitical risks, and the global energy transition. We like broad commodity exposure, and continue to favor gold, which we see as an attractive hedge.
Did you know?
- Returns are generally strongest when supply-demand imbalances or macro risks—like inflation or geopolitical events—are elevated. In such periods, broad commodity exposure can help diversify portfolios and protect against shocks.
- Commodities have also experienced long periods of strong out- and underperformance versus equities. Hence, we generally see them as a tactical, not permanent, component of a long-term portfolio.
- For investors with an affinity for gold, we believe a modest allocation of up to a mid-single digit percentage can enhance diversification and buffer against systemic risks.
- For investors with substantial allocations and significant unrealized profits in gold, broadening commodity exposure to include copper, aluminum, and agricultural assets can help diversify sources of future return.
Original report – What's next for commodities?, 3 February 2026.
